Mehabe score: 5 G Factor: 2 Piotski Score: 5 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 2 and Piotski score of 5.
Description
Established in 1991 Onward Technologies Ltd is a tech company focusing on Engineering Research & Development (ER&D), Digital Transformation and IT consulting services (ITS).
Headquartered at Mumbai and has clients across India, USA, UK & Europe. The promoters have 3 Decades of Experience in the IT Industry.
Main Points
Business Segments
Engineering Research & Development (ER&D)(73% in FY20 vs 67% in FY18): Includes product design, electronics and embedded engineering, engineering analysis, engineering documentation and maintenance and manufacturing solutions.
Provides application management services, database maintenance support, technical helpdesk support, infrastructure support, retail banking solutions, digital factory, data architecture design & modelling, big data and advanced analytics.Site:ONWARDTECMain Symbol:ONWARDTEC
Stock trades at 234.0, above its 50dma 184.46. It also trades above its 200dma 126.31. The stock remains bullish on techicals
The 52 week high is at 239.00 and the 52week low is at 53.50
Price Chart
P/E Chart
Sales and Margin
Strengths
– has reduced debt.
– has been maintaining a healthy dividend payout of 42.91%
Weakness
– The company has delivered a poor sales growth of 3.96% over past five years.
– has a low return on equity of 12.38% for last 3 years.
– might be capitalizing the interest cost
-Earnings include an other income of Rs.20.55 Cr.
Competition
– The industry trades at a mean P/E of 32.4x. Happiest Minds trades at the industry’s max P/E of 118.68x. ONWARDTEC trades at a P/E of 22.8x
– Industry’s mean G-Factor is 3.8 while the mean Piotski score is 9.0. ONWARDTEC has a G-Factor of 2 and Piotski scoreof 5.
– Average 1 month return for industry is 16.6%. The max 1- month return was given by Happiest Minds: a return of 42.02 %
Quarterly Results
Sales for period ended Jun 2021 is Rs 69.6 cr compared to Rs 56.03 cr for period ended Jun 2020, a rise of 24.2%
Company reported negative operating profit of Rs -1.87 cr for period ended Jun 2021. For same period last year, operating profit was 3.76
The EPS for Jun 2021 was Rs 6.03 compared to Rs 1.33 for previous quarter ended Mar 2021 and Rs 0.24 for Jun 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 254.0 cr for period ended TTM vis-vis sales of Rs 240.0 cr for the period ended Mar 2021, a growth of 5.5%. The 3 year sales cagr stood at -0.9%.
Operating margins shrank to 5.0% for period ended TTM vis-vis 7.0% for period ended Mar 2021, contraction of 200.0 bps.
Net Profit reported at Rs 17.0 cr for period ended TTM vis-vis sales of Rs 7.0 cr for the period ended Mar 2021, rising 58.8%.
Company recorded a healthy Net Profit CAGR of 19.3% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
CashFlow from operating activities was positive.
CashFlow from operating activities: Rs 33.0 cr for period ended Mar 2021 vis-vis Rs 29.0 cr for period ended Mar 2020
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has had stable/constant Return on Equity (RoE) metric. The RoE on Last Year basis was 10.0% compared to 12.0% over the last 3 Years. – The stock has given a return of 275% on a 1 Year basis vis-vis a return of 45% over the last 3 Years. – The compounded sales growth on a TTM bassis is -2% vis-vis a compounded sales growth of -1% over the last 3 Years. – The compounded profit growth on a TTM basis is 415% vis-vis a compounded profit growth of 3% over the last 3 Years.
Ratios
Shareholding Pattern
– Public shareholding has remained largely constant. The Mar 2021 public holding stood at 38.27% vis-vis 38.12% for Dec 2020
Conclusion
– has reduced debt.
– has been maintaining a healthy dividend payout of 42.91% – The company has delivered a poor sales growth of 3.96% over past five years.
– has a low return on equity of 12.38% for last 3 years.
– might be capitalizing the interest cost
-Earnings include an other income of Rs.20.55 Cr.
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 184.46 and is trading at 234.0 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
